Audit Completion & Reporting Flashcards
What are the two components to the completion phase?
The financial statements themselves
> Do they comply with companies act 2006
> Do they make sense - analytical procedures. Work done should corroborate movement
> Disclosures correct?
The work done to support the opinion
> In line with plan
> enough/right work?
What is the impact of assessing the errors that have been discovered throughout the audit at completion
Do misstatements indicate the plan needs to be revised/materiality adjusted?
Misstatements presented to management for adjustment
Impact of uncorrected misstatement - material in aggregate?
Obtain written representations that the uncorrected misstatements are immaterial
How does an auditor obtain evidence over whether opening balances contain misstatement in a first year audit?
Determine whether PY closing balances were correctly brought forward to the current period
Determine whether opening balances reflect the appropriate accounting policies
review preceding auditors WP
Does CY work provide evidence over Op bals?
Opening balances in ISAs
How do you test managements assessment of their going concern status?
Indicators that GC status may be inappropriate; large amount of receivables that are unable to pay, obsolete/impaired assets, investments which have lost value
review profit forecasts
review loan covenants will not be in breach
review minutes/legal claims
What would be the impact on the audit report if the going concern assumption is appropriate but there is material uncertainty about their ability to continue as a going concern in the future. This is adequately disclosed in the financial statements
Unqualified opinion
Modified audit report - add a ‘material uncertainty related to going concern’ paragraph
What would be the impact on the audit report if the financial statements are prepared on the going concern basis but the auditors deem this to be materially incorrect?
Adverse opinion
Must an audit report always comment on the going concern status of a company?
Yes - always a separate paragraph ‘conclusions related to going concern’ even where its use is appropriate
What is an adjusting vs non adjusting event
where do they need to be reflected
An adjusting event is where the conditions existed at the date of the financial statements, non adjusting events are where the conditions arose after the date of financial statements
Adjusting events need to be reflected in restating the FS
non-adjusting events need to be disclosed in notes
What factors would ensure the completion phase of an audit goes smoothly?
Well planned
Staff were well briefed and trained
Staff execute the plan on time
Why is it important to evaluate the effect of the Summary of Audit Misstatements at completion?
Could indicate other misstatement may exist
Could collectively approach materiality
What are some attributes of effective communication with those charged with governance?
Timely - entity able to act on recommendations
Expectations that were set in engagement letter are fulfilled
Include managements comments
PY points repeated if no action taken
Disclaimer so third parties don’t rely on report
How will an auditors report & responsibilities for a listed client differ to that for a non-listed?
A listed client’s auditor’s report will refer to the review of the corporate governance statement, required by the UK Corporate Governance Code
Length of time for audit teams on engagements. Non listed, third party test after 10 years
Fee dependence limit 15% for non, 10% for listed
Mandatory firm rotation after 20 years for listed. No mandatory limit for non-listed
Auditors report must be submitted within 9 months or reporting date for non-listed and 6 months for listed
What are the two types of opinions that can be issued in an auditor’s report?
Modified opinion - either the auditor has issues with FSs or with the level of evidence obtained
Unmodified opinion - auditor is satisfied with evidence obtained and supports the view presented by FSs
What are the three types of reports that can be issued?
An unmodified auditor’s report
A modified auditor’s report with an unmodified audit opinion
A modified auditor’s report with a modified auditor’s opinion (Qualified, adverse or disclaimer)
When should the auditor add an emphasis of matter paragraph?
When should the auditor add an other matters paragraph?
Emphasis of matter paragraph: when the auditor considers it necessary to draw the readers attention to a matter that is fundamental to the user’s understanding of the FSs
> It’s inclusion should be communicated to TCWG
Other matter; where the auditor considers it necessary to draw user’s attention to any matters other than those presented or disclosed in the FSs that are relevant to understanding the audit
